We aim to test 500,000 patients a day in 5 years: Dr Lal PathLabs CMD

Dr Lal PathLabs is India's largest diagnostic services player by revenue, with 289 laboratories across the country

Dr Lal PathLabs’ performance in recent years — especially amid the pandemic — may have caught the fancy of many, but the company’s journey of over four-and-a-half decades is far more intriguing. Equally interesting are its future plans.

Arvind Lal, the company’s current executive chairman, stepped into his father’s shoes when he took over the reins of Central Clinical Laboratory (as it was then named) in 1977, after the latter’s demise.

Today, Dr Lal PathLabs (DLPL) is India’s largest diagnostic services player by revenue, having a network of 289 laboratories and over 4,000 collection centres across the country.

Lal, a deeply spiritual person, believes in divine intervention. “My mother was very spiritual, and would visit any guru of repute that she would get to know of. Just like people go window-shopping, my mother went guru shopping. Finally, she met her guru, and I was very deeply connected with him as well,” Lal reminisces.

There is an old adage that success is 99 per cent perspiration and one per cent inspiration, Lal quips, adding that his guru taught him that it’s this one per cent inspiration that helps you achieve the remaining 99 per cent. “Work is worship, and one has to focus on ‘Karma’. That’s perhaps the reason why Western societies are more advanced than us; their karma is way ahead of us,” Lal says.

As a young man of 28, who was at the helm of the diagnostic lab that his father SK Lal had founded, he started new pathology tests which at that point were not conducted by private labs in the country. For example, thyroid testing was categorised as nuclear medicine, and the Bhabha Atomic Research Centre (BARC) was the nodal agency that helped with kits and procedures.

“We started thyroid testing in private laboratories in India in 1982. There are hundreds of tests that I have pioneered in the diagnostics space. The term lipid profile was, in fact, coined by me,” Lal says.

Brisk business followed. From handling just 25-30 patients a day in the Delhi laboratory, DLPL has scaled up today to test 100,000 patients a day. Last year DLPL handled 28.7 million patients — some 78,630 patients a day.

Medicine, however, was not Lal’s first choice. His tryst with it, and eventually with pathology, is an accident.

His only dream was to become a fighter pilot in the Indian Navy. “I wanted to be in the seas and fly, too,” he says. His dream was shattered when during the selection process it was found that he was myopic.

This changed his life forever. As a student of Modern School in Barakhamba Road, New Delhi, Lal now opted to study biology. Higher Secondary was based on a three-year course from Class 9 to 11 in those days. He had not taken biology as a subject in Class 10, and now had to study the course in a span of just eight months.

“The principal of my school said that we had to take special permission from the Delhi Board of Secondary Education, which came in only a week before my higher secondary exam. Till then it was all a risk that I had taken,” he recalls.

Once he had become a doctor from the Armed Forces Medical College in Pune, Lal did not look back. He was teaching undergraduate medical students, pursuing a post graduate in pathology and was the warden of the college hostel, when his father suddenly passed away.

Lal was not keen to join the family business, but this tragedy turned his life around. He calls it the “watershed” moment of his life.

In 1995 he changed the structure of the firm from a partnership to a private limited company, and the name from Central Clinical Laboratory to Dr Lal PathLabs. “Whenever the receptionist took a call, she would never say Central Clinical Lab. She would unfailingly say Dr Lal’s PathLabs. So I decided it’s best to change,” Lal says.

The lab was set up by his father in 1949, a year he was also born. “The lab and I are like twins in a way,” he quips.

In 2004, US-based Quest Diagnostics decided to foray into India, and Lal was in talks with them for an equal partnership. The deal, however, did not go through, and one year later in 2005 Lal raised his first round of private equity investments when WestBridge Capital bought a 26 per cent stake in the company. The business was then valued at Rs 106 crore.

It was in 2005 that Lal brought in Om Prakash Manchanda as the chief executive officer. Manchanda is now the managing director of DLPL, and the credit for much of the firm’s pan-India expansion goes to him.  

After a follow-on investment by WestBridge, by 2010 another PE firm, TA Associates, bought a 16 per cent stake from Sequoia Capital India, which had acquired WestBridge Capital in 2006. In 2013 the company was valued at Rs 1,750 crore when WestBridge Crossover Fund invested $44 million.

DLPL was listed on the bourses in 2015, having raised Rs 638 crore through an initial public offer. Since then revenues have soared by 70 per cent, and profits have more than doubled. In FY21, the pandemic year, revenues grew by 18.9 per cent to Rs 1,581 crore and net profit by 29.1 per cent to Rs 292 crore. Today, DLPL’s market capitalisation is around Rs 23,000 crore.

Delhi-NCR is the key market for DLPL, contributing 35 per cent of revenues, but in recent years the contribution from markets in the rest of India has been growing. The company entered the western India markets through its acquisition of Suburban Diagnostics last year.

Lal’s focus now is on primary health care, which he thinks is much neglected: “One needs to focus on the bottom of the pyramid, where 70 per cent of India lives.”

He and his wife Vandana Lal have founded the ALVL Foundation, a non-profit that aims to improve primary health care in India. “We have partnered with 10 health and wellness centres (HWCs) in Uttarakhand and turned them into smart HWCs. The government wants to set up 150,000 HWCs in India, and they can replicate our model, where a non-profit partners with these to run and handhold them,” Lal says. He believes corporates should be encouraged to channelise their corporate social responsibility funds through non-profits into primary health setups like HWCs.

Do the growing crop of e-commerce aggregators and the online business model pose a threat to conventional diagnostics chains?

Lal does not think so. He emphatically says that medicine and health care are businesses of trust. “There are roughly 3 lakh laboratories in India, and only 8,000 pathologists. If the government makes the NABL accreditation mandatory, then over half of these laboratories would cease to exist.”

The diagnostic services industry is highly fragmented — standalone centres account for 47 per cent of the market, while hospital-based diagnostics have a 37 per cent share. Diagnostic chains currently have a 16 per cent share of this $10 billion market. Of this, large pan-India chains have a 35-40 per cent share, while small regional chains enjoy a 60-65 per cent share.

Non-Covid business is back to pre-pandemic levels, and preventive testing is going to become more important in the days to come as awareness levels rise, Lal believes. About 70 per cent of all treatment decisions are based on pathology tests, he adds.

The next step is an ambitious one. “I want to scale up the business to test 500,000 patients a day in the next five-year horizon,” says Lal.